ECB Omits Guidance That Rates May Be Cut Further

In a widely expected move that will nevertheless be parsed to death, the ECB has omitted guidance that rates may be cut further.

• ECB OMITS GUIDANCE THAT INTEREST RATES MIGHT BE CUT AGAIN

They’re now going with this more “hawkish” assessment: “We expect interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.”

There were of course no actual changes to policy:

• European Central Bank confirms asset purchase program at EU60b a month through at least December.
• Reiterates that rates to stay at present or lower levels past QE horizon, sees QE running until end of December or beyond if needed
• Keeps main refinancing rate unchanged at 0.00%
• Leaves deposit facility rate unchanged at -0.40%
• Keeps marginal lending rate unchanged at 0.25%

The knee-jerk reaction in the euro was lower.

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At today’s meeting, which was held in Tallinn, the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.

Regarding non-standard monetary policy measures, the Governing Council confirms that the net asset purchases, at the current monthly pace of €60 billion, are intended to run until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. The net purchases will be made alongside reinvestments of the principal payments from maturing securities purchased under the asset purchase programme. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.